The Czech koruna moved sideways and
kept in a tight range of EURCZK 31.376 – 31.476 yesterday. However, the activity on
the market was rather high, and demand
and supply of the unit were balanced. The
koruna ignored July’s retail sales figures
released in the morning. The sales were
almost flat due to an unfavorable
comparative base. Working-day-adjusted
sales posted rather health increase. From
the monetary policy point of view the release
is neutral. Today morning Czech
government coalition leaders agreed on
the state budget outline for 2005 after
they cut the planned gap from CZK 93 bn
to CZK 84 bn. Hence Social democrats and
especially the prime minister Gross retreated
to KDU, a junior partner in the coalition,
which asked lower deficit. The government plans to save money on welfare benefits and
to raise policemen’s wages as planned.
However, the agreement has to be
confirmed by the Government and
Parliament yet. The Prime Minister Gross
said yesterday he inclined toward sale of
Cesky telecom through the capital market.
However, the government haven’t decided a
form of the sale yet.
Today we see some room for the koruna to
strengthen. The agreement on the 2005
budget may push koruna higher. Yesterday’s
new 10-year high of the Prague stock
exchange is also slightly positive for the
koruna.
ČSOB - Investment Research